Mark Verzyl

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CMHC pushes for the removal of 5% down option for First time buyers.




Western Canada might be happy to see the backside of Evan Siddall when he leaves his post as CEO at CMHC, as his policies continue to crush the buying power of the “little guy” while adding to the tough economic conditions brought on by lower oil prices, compounded by the advent of COVID and subsequent business closures.


Siddall brought on the “stress test” to break the possible bubble of housing inflation in Toronto and Vancouver, with his “1 standard fits” for all of Canada. The need for a stress test in Alberta, or any of the prairie provinces, was about as necessary as the world needing a 2nd wave of COVID-19.


The stress tests main function was to stop the rising property prices in Canada’s top 2 populated cities, while all it did was cripple the ability of not only first time buyers to get into ownership but many people who would like to afford a larger property, or even an investment property, everywhere. Why have prices still been steadily rising in the East where the stress test was the main target? Investors have been gobbling up Real Estate properties in droves (in Toronto, Ottawa, Montreal), and while prices are rising, they can continue to leverage the value of their properties to buy more properties, which is fantastic for investors. Don’t get me wrong, I’m an investor, I have rental properties and I’m all over that…..but what I hate to see is the first time buyers being robbed of the same opportunity that I had 23 years ago, while affordability is being eroded away all because of idiotic, government policies.


Realizing that they screwed it up with the stress test, and not willing to roll it back, CMHC, or shall we say Siddall, backed by the federal government, came out with the “First time buyers incentive program” which is somewhat complicated, helps no one, and for any takers, they will take a portion of your equity when you sell, (this would be a portion of the profit they would have made, when the home goes up in value.) Cost to tax-payers? $100 million, and conveniently rolled out a few weeks prior to the election. Simply lowering the stress test or eliminating it would have saved the taxpayer $100 Million dollars, not to mention the cost of creating the program as well as the cost of operating it.


The need for a stress test in Alberta, or any of the prairie provinces, was about as necessary as the world needing a 2nd wave of COVID-19.

Now Siddall is suggesting that we cancel the 5% down program for everyone, and the new minimum to be 10% down. Here is why this is a stupid idea:


1.     Removing the ability to put down 5% as a down payment will push a huge % of buyers out of the market. What is that %? Stay tuned for that number

2.     A large portion of those people, and the people that sell their current homes to first time buyers, purchase new construction properties.

3.     New home construction and housing services is 15-18% of the GDP of Canada.

4.     Post Covid, construction will benefit Canadians as it is a large portion of our economy. Removing 5% down will further affect pre-construction numbers negatively, affecting builder profits, affecting the number of people employed and sub-contracted to builders, less taxes being collected, more unemployment being paid out….and the ripples continue on down the line….

5.     20% down is the minimum down payment for investors. This will not affect investment down payments, so the possibility of prices to continue to trend upwards in some markets is very real.

6.     More people will be forced to rent, and for years longer, trying to save enough to purchase at 10% down.

7.     As time goes on, rents will increase, cutting into savings, further eroding the possibility of home ownership.


The foreclosure rate in the US for Sub-prime mortgages runs from 3% to a whopping 14% (and its still on-going). US foreclosure rates have always been faaaaar above Canada. Canada typically sits at about .35%. You heard that right and let me spell it out: point three five percent. Alberta spiked 2 times recently, in 2010 and 2019, but always under 1%. 


Siddall has been tooting that home prices could fall as much as 29%. Again, his one notion fits the entire country is way off base considering that Alberta went through some tough economic times, and already saw that price erosion, so its incredibly unlikely that we will see anywhere near that dip.


So why do we suddenly, need to cancel the 5% down option? Right in the middle of the worst economic crisis, EVER, when, as he stated, homes will drop up to 29%? It’s not like foreclosures have been off the charts.


This does not sound like a time when you need to put more pressure on the housing industry.


It sounds and looks like a time when you need to push through policy’s that promote home ownership, rather than killing it, and the building industry with it.


This has all the ingredients of Canada’s wealth gap widening enormously, and, putting the dream of home ownership out of the picture for many Canadians. 


By Mark Verzyl

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